Entrepreneurs’ property rights at stake in France

By: Guest Authors

By Dr. Sylvain Charat

It happened on a cold of day during the last French presidential campaign in a small industrial town called Florange, in Eastern France. On February 12th, 2012, the campaigning and would-be president Francois Hollande climbed a small truck ladder to get on the roof. Up there, surrounded by union strikers and red flags, the contender took the microphone to talk to hundreds of steel workers in front of him. They were about to lose their jobs: labor costs and social regulation hampered the factory’s competitiveness and Lakshmi Mittal, the Indian owner, did not have any other solution than to shut it down if it did not want to lose money.

In this tense social context, the union comrades staring at the Socialist candidate François Hollande may have felt like they were looking at a new Che Guevara. “When a company wants to get rid of production unit, but does not want to sell it, we will force it to find a buyer who will take over the activity,” promised the candidate. The crowd cheered at this man who, if president, would have the government dispose of entrepreneurs’ properties.

Yet Francois Hollande had forgotten something he should not have: Property rights are protected by the French Constitution. The right to private property is a fundamental right, originating from the concept of individual sovereignty, which is the very foundation of Western liberal government. But on that small truck’s roof, Francois Hollande merely wiped it out. His promise to the communist and far-left unions was as clear a threat to the constitutional right of property as to the freedom of settlement protected by the European Union. The promise could not be kept since as president, Francois Hollande would swear to protect the Constitution.

Yet, once elected, Francois Hollande wanted to keep his words and it must be pointed out that the French president is not the kind a man that gives up easily. He asked the government along with three members of parliament to draft a bill that would enforce his collectivist promise. And the bill must be written in such way that it would be accepted by the French Constitutional Council. On April 30th, 2013, the draft was ready and presented to the president. Obligation gave way to pressure. This pressure would increase on the entrepreneurs – owners according to a four-step procedure.

First step: The owner who wants to shut a factory down must inform the workers’ committee and look for a buyer during three months. During this period, the owner must give a reasoned reply to each purchase offer he would receive and inform the workers’ committee. In other words, unions will closely monitor the owner.

Second step: If the workers’ committee thinks that the owner did not act dutifully and in good faith, then the committee could go to court and request the president of the commercial court to intervene. But, can unions be trusted to decide about an owner’s good faith? The threat of going to court is always present.

Third step: The judge will decide if the owner has made the necessary efforts to find a buyer and if he has turned down serious purchase offers. If ever the feeling is that the owner did not do his job then he will have to pay a penalty.

Fourth step: The commercial court could ask the owner to pay a penalty fee that will amount to twenty times the national minimum wage per lost jobs. It means that $36,400 would have to be paid to the government for each laid off worker. And the owner should be happy not to be thrown in jail.

The French government and the three members of parliament made their best effort to weaken entrepreneurs’ property rights. They gave the workers’ committee a limitless influence that hampers the very principle of property. The owner cannot simply decide whether to shut down. It is no longer in his ability to do so. He is being deprived of his rights and will be forced into a government-approved exchange or pay a fine. The bill, called the “Florange Bill”, is actually about to change the very essence of property rights in France and enforce the collectivization of production that will actually dispossess entrepreneurs from their property.

Entrepreneurs should be concerned. If this law is passed, any private property owned by a business could become a mere “trusteeship held for the benefit of society as a whole” as Ayn Rand put it for one of her collectivist characters in “Atlas Shrugged”. Yet in France, the novel is becoming reality.

— Dr. Sylvain Charat is a graduate from the University of the Sorbonne, Paris, was chief of staff for a former French Minister of Finance in the French National Assembly, and is now a public affairs consultant, specializing in the welfare system. He is also a contributing scholar with The Center for Vision & Values at Grove City College, and his daily analysis can be found at his “Welfareship Explained” blog.